IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
________________________________________________
CASSANDRA HUGHLETT,
Plaintiff-Appellee,
Vs. C.A. No. 02A01-9505-CV-00118
Shelby Circuit No. 40395 T.D.
SHELBY COUNTY HEALTH CARE
CORPORATION, REGIONAL MEDICAL
CENTER AT MEMPHIS a/k/a THE MED,
ET AL,
FILED
August 8, 1996
Defendant-Appellant.
___________________________________________________________________________
Cecil Crowson, Jr.
Appellate C ourt Clerk
FROM THE CIRCUIT COURT OF SHELBY COUNTY
THE HONORABLE ROBERT L. CHILDERS, JUDGE
Gavin M. Gentry of Memphis
For Defendant-Appellant
Louis P. Chiozza, Jr., of Memphis
For Plaintiff-Appellee
AFFIRMED AND REMANDED
Opinion filed:
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
CONCUR:
DAVID R. FARMER, JUDGE
HOLLY KIRBY LILLARD, JUDGE
The sole issue in this case is whether a plaintiff in a medical malpractice action may
recover from a defendant health care provider the amount of plaintiff’s medical expenses paid
by the Tennessee Medicaid program which is a part of the federal social security program.
On April 9, 1991, plaintiff Cassandra Hughlett underwent a cesarean section to aid in the
birth of her child. Her complaint against defendants, Shelby County Health Care Corporation,
Regional Medical Center at Memphis, a/k/a “The Med,” and the University of Tennessee
Medical Group, Inc., alleges that at some point during the course of the surgery, a surgical
sponge and/or “lap pack” was placed in the plaintiff’s abdomen and was not removed at the
conclusion of the surgical procedure. The complaint avers that subsequent to her discharge from
the hospital, the plaintiff experienced severe pain as a result of the sponge and/or lap pack, and
that she was readmitted to the hospital to remove the “foreign body.” Plaintiff alleges that the
defendants1 were negligent in their provision of medical treatment to her and that such
negligence was a proximate cause of the her injuries. The defendant’s answer denies any
negligence and joins issue on the material allegations of the complaint.
“The Med” filed a motion in limine to exclude evidence of the plaintiff’s medical
expenses paid for by social security benefits. At the hearing on the motion in limine, counsel for
the parties announced that a settlement had been reached between the parties, and that the only
issue remaining for decision was the question of whether the plaintiff could recover $6,777.17,
the amount of the Medicaid payments, from the defendants. The trial court held that the amount
of the Medicaid payments made to, or on behalf of, plaintiff as a result of her injuries were
recoverable from the defendants, and by order entered March 2, 1995, the court entered judgment
for the plaintiff in the amount of $6,777.17. Shelby County Health Care Corporation has
appealed and presents the following issue for review:
Whether or not social security benefits are included in Tennessee
Code Annotated § 29-26-119 as a collateral source? Or, stated
another way: Whether or not the plaintiff in a medical malpractice
case can recover from the defendant the amount of plaintiff’s
medical expenses paid for by social security benefits.
The issue in this case requires an interpretation of T.C.A. § 29-26-119 (1980), which
1
The University of Tennessee Medical Group, Inc., was initially named as a defendant,
but was later dismissed and is not involved in this appeal.
2
provides:
29-26-119. Damages. - In a malpractice action in which liability
is admitted or established, the damages awarded may include (in
addition to other elements of damages authorized by law) actual
economic losses suffered by the claimant by reason of the
personal injury, including, but not limited to cost of reasonable
and necessary medical care, rehabilitation services, and custodial
care, loss of services and loss of earned income, but only to the
extent that such costs are not paid or payable and such losses are
not replaced, or indemnified in whole or in part, by insurance
provided by an employer either governmental or private, by social
security benefits, service benefit programs, unemployment
benefits, or any other source except the assets of the claimants or
of the members of the claimants’ immediate family and insurance
purchased in whole or part, privately and individually.
The medical expense payments were made pursuant to Tennessee’s “Medical Assistance
Act of 1968" codified as T.C.A. § 71-5-101, et seq. (1995). The 1968 Act is intended “to make
possible medical assistance to those recipients determined to be eligible under this chapter to
receive medical assistance that conforms to the requirements of title XIX of the Social Security
Act [codified in 42 U.S.C. 1396 et seq.(1992 & Supp. 1996)] and the regulations promulgated
pursuant thereto.” T.C.A. § 71-5-102 (1995).
T.C.A. § 71-5-117 provides in part, pertinent to the issue before us:
71-5-117. Recovery of benefits - State’s right of subrogation -
Assignment of insurance benefit rights - Commissioner
authorized to require certain information identifying persons
covered by third parties - State’s right of action. - (a) Medical
assistance paid to, or on behalf of, any recipient cannot be
recovered from a beneficiary unless such assistance has been
incorrectly paid, or, unless the recipient or beneficiary recovers
or is entitled to recover from a third party reimbursement for all
or part of the costs of care or treatment for the injury or illness for
which the medical assistance is paid. To the extent of payments
of medical assistance, the state shall be subrogated to all rights of
recovery, for the cost of care or treatment for the injury or illness
for which medical assistance is provided, contractual or
otherwise, of the recipients against any person. Medicaid
payments to the provider of the medical services shall not be
withdrawn or reduced to recover funds obtained by the recipient
from third parties for medical services rendered by the provider
if these funds were obtained without the knowledge or direct
assistance of the provider of medical assistance. When the state
asserts its right to subrogation, the state shall notify the recipients
in language understandable to all recipients, of recipient’s rights
of recovery against third parties and that recipient should seek the
advice of an attorney regarding those rights of recovery to which
recipient may be entitled.
42 U.S.C. § 1396a (Supp. 1996) states in pertinent part:
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1396a. State plans for medical assistance
(a) Contents
A state plan for medical assistance must --
* * *
(25) provide --
(A) that the State or local agency administering such plan will
take all reasonable measures to ascertain the legal liability of third
parties (including health insurers, group health plans (as defined
in section 607(1) of the Employee Retirement Income Security
Act of 1974 [29 U.S.C.A. § 1167(1)]), service benefit plans, and
health maintenance organizations) to pay for care and services
available under the plan, including--
(i) the collection of sufficient information (including the
use of information collected by the Medicare and Medicaid
Coverage Data Bank under section 1320b-14 of this title and any
additional information as specified by the Secretary in
regulations) to enable the State to pursue claims against such third
parties, with such information being collected at the time of any
determination or redetermination of eligibility for medical
assistance, and
(ii) the submission to the Secretary of a plan (subject to
the approval by the Secretary) for pursuing claims against such
third parties, . . . .
* * *
(B) that in any case where such a legal liability is found to exist
after medical assistance has been made available on behalf of the
individual and where the amount of reimbursement the State can
reasonably expect to recover exceeds the costs of such recovery,
the State or local agency will seek reimbursement for such
assistance to the extent of such legal liability . . . .
The Med asserts that Medicaid payments are a part of social security benefits and that
“the wording of the statute [T.C.A. § 29-26-119] is clear that plaintiff cannot recover medical
expenses paid for by social security benefits.”
Our Supreme court was faced with a similar issue in Nance by Nance v. Westside Hosp.,
750 S.W.2d 740 (Tenn. 1988). In Nance, the Court considered the question of whether worker’s
compensation benefits were included within the scope of T.C.A. § 29-26-119. Plaintiff Nance
sustained a back injury during the course of his employment with Stauffer Chemical Company.
During surgery to repair a damaged disc, he suffered an adverse reaction to an anesthetic
resulting in serious permanent injuries. The plaintiff’s guardian brought a medical malpractice
suit against the hospital and other health care providers. Stauffer Chemical intervened in the suit
in order to assert its statutory subrogation lien for worker’s compensation benefits paid to and
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for Nance. The defendants asserted that under T.C.A. § 29-26-119, the worker’s compensation
benefits “paid or payable” to the plaintiff constituted
collateral source benefits that were not recoverable against the defendants.
The Court determined that although worker’s compensation benefits are not specifically
provided for in T.C.A. § 29-26-119, such benefits are included in the general wording “any
other source,” because worker’s compensation benefits are within the same classification of
benefits specified in the statute. The Court held that the plaintiff could recover from the
defendants the amount of worker’s compensation benefits paid to, or on behalf of, the plaintiff.
The Court stated:
[W]e think the Legislature intended to exclude worker’s
compensation benefits from the scope of T.C.A. § 29-26-119 by
the inclusion of the modifying phrase “and such losses are not
replaced, or indemnified.” In order to mitigate the damages, the
statute requires that the benefits be paid or payable and also
indemnify or replace the tort victim’s losses. That phrase avoids
a double recovery by tort victims and also removes from the
statute any collateral source that has subrogation rights. Where
benefits carry a right of subrogation and a legal obligation on the
part of the tort victim to repay the collateral source, the tort
victim’s losses have not been replaced or indemnified.
Nance, 750 S.W.2d at 743.
We view the decision in Nance as dispositive of the issue before us. The Med, however,
contends that Nance is distinguishable because worker’s compensation benefits are not specified
in the statute, while social security benefits are so specified. This distinction is tenuous at best.
The Nance Court held that the specifically listed benefits in T.C.A. § 29-26-119 are in the
classification of “collateral source benefits,” and that worker’s compensation benefits are in the
same classification. Thus, the statutory language “any other source” includes worker’s
compensation benefits.
Defendant also asserts that pursuant to T.C.A. § 71-5-117, the state has only a right of
subrogation, and, therefore, if the recipient of the medical assistance cannot recover, the state
cannot recover. We must respectfully disagree. The Nance Court held that where there is a right
of subrogation, or a legal obligation on the part of the tort victim to repay the collateral source,
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the victim’s losses have not been “replaced or indemnified,” and, therefore, the benefits so paid
are recoverable by the plaintiff. We fail to find a meaningful distinction between the nature of
the benefits paid in Nance and the benefits paid in the case at bar.
Defendant argues that the right to recover the amount of the Medicaid payments is based
solely on subrogation pursuant to T.C.A. § 71-5-117, and that since the recipient’s claim is
barred by T.C.A. § 29-26-119, there can be no claim by the subrogee. Defendant may have
overlooked the provisions of 42 U.S.C. 1396a (a) 25(A) which mandates that Medicaid
payments to a tort victim should be borne by the tortfeasor when possible. The effect of 42
U.S.C. § 1396a (a) 25(A) was considered in Harlow v. Chin, 545 N.E.2d 602 (Mass. 1989),
where the plaintiff brought a medical malpractice action against a doctor based on the doctor’s
failure to diagnose a herniated disc in the plaintiff’s back. Plaintiff had received Medicaid
benefits and defendant argued that the Medicaid payments constituted collateral source benefits
under the Massachusetts medical malpractice statute, and, therefore, plaintiff could not recover
the amount of the Medicaid payments from the defendant. In holding that the amount of the
Medicaid payments were recoverable, the Supreme Judicial Court of Massachusetts stated:
A Federal statute requires that States receiving Federal funds
must pursue recovery of the funds from legally liable third
parties. 42 U.S.C. § 1396a (25) (1982). A Federal regulation
requires the State to reimburse the Federal government a
proportion of such recovery. A State statute duly provides for
recovery from third parties and subrogation of the plaintiff’s
claim.
The defendants argue with regard to Medicaid benefits that there
is no right of subrogation “based in any federal law” within the
meaning of G.L. c. 231, § 60G(c). We disagree. The Federal
statute implementing partial reimbursement of State Medicaid
programs mandates that any State receiving these funds must
pursue reimbursement from legally liable third parties. The fact
that technically a State statute provides for the subrogation is
irrelevant. Because the Commonwealth’s pursuit of
reimbursement is required by Federal law, the right of
subrogation is “based in” Federal law.
545 N.E.2d at 610 (citations and footnotes omitted).2
2
For similar results, see Lusby by and through Nichols v. Hitchner, 642 A.2d 1055 (N.J.
Super. Ct. App. Div. 1994), Marmorino v. Housing Authority of the City of Newark, 461 A.2d
171 (N.J. Super. Ct. LawDiv. 1983).
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At issue is whether the Medicaid program or the defendant health care provider should
bear the costs of Medicaid payments made to the injured tort victim. Both federal law and
T.C.A. § 71-5-117 require reimbursement of Medicaid payments by responsible third parties.
In Nance, the worker’s compensation statute accomplished the same purpose. In the case at bar,
as in Nance, the plaintiff’s “losses are not replaced or indemnified in whole or in part.” Nance
removes any doubt that benefits falling in this category are recoverable.
The judgment of the trial court is affirmed, and the case is remanded for such further
proceedings as may be necessary. Costs of the appeal are assessed against the appellant.
_________________________________
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
CONCUR:
_________________________________
DAVID R. FARMER, JUDGE
_________________________________
HOLLY KIRBY LILLARD, JUDGE
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